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CIRCULAR

Guiding the identification of origin of exports and imports which are not wholly obtained goods defined in the Government's Decree no. 19/2006/ND-CP of February 20, 2006, detailing the Commercial Law regarding the origin of goods

Pursuant to the Government's Decree No. 29/2004/ND-CP of January 16, 2004, defining the functions, tasks, powers and organizational structure of the Trade Ministry;

Pursuant to the Government's Decree No. 19/2006/ND-CP of February 20, 2006, detailing the Commercial Law regarding the origin of goods;

The Trade Ministry hereby guides the identification of origin of exports and imports as follows:

I. GENERAL PROVISIONS

1. Scope of regulation

a/ This Circular guides the identification of origin of exports and imports which are not wholly obtained goods defined in Article 8 of the Government's Decree No. 19/2006/ND-CP of February 20, 2006, detailing the Commercial Law regarding the origin of goods;

b/ For exports eligible for the general tariff preferences, their origin shall be identified according to the rules of origin of countries of importation;

c/ For exports and imports eligible for the tariff preferences or non-tariff preferences under treaties to which the Socialist Republic of Vietnam has signed or acceded, their origin shall be identified according to Vietnam's legal documents detailing the rules of origin provided for in the above-said treaties.

2. General rules

Goods, of which the origin is identified under the guidance of this Circular, shall be regarded as originating from a country or a territory where the last processing operation which substantially transforms such goods has been carried out.

II. METHODS OF IDENTIFYING ORIGIN OF GOODS

1. "Change in tariff classification of goods" criterion

a/ "Change in tariff classification of goods" means a change in four-digit HS heading of a goods as compared with the HS heading of materials not originating from the country of production (including imported materials and materials of unidentifiable origin) used for the production of such goods;

b/ Four-digit HS headings of goods mentioned at Point a, Clause 1, Section II of this Circular shall be identified according to current regulations.

2. "Ad valorem percentage" criterion

a/ "Ad valorem percentage" means the proportion of an added value obtained after a country or a territory produces, manufactures or processes materials not originating from such country or territory to the total value of produced goods;

b/ The above-said added value must account for at least 30% of the value of produced goods and be expressed according to the following formula:

FOB price ' price of materials not originating

from the country or territory of production

------------------------------------------------ x 100% = 30%

FOB price

c/ "Materials not originating from the country or territory of production" include materials originating from another country or territory and materials of unidentifiable origin;

d/ "Price of materials not originating from the country or territory of production" means the CIF price of directly imported materials (for materials originating from another country or territory) or the price at the time of purchase stated in value added invoices (for materials of unidentifiable origin) which are used for the production, manufacture or processing of ultimate products;

e/ "FOB price" means the price stated in the export contract and shall be calculated as follows:

- FOB price = Ex-workshop price + other costs;

- "Other costs" mean costs arising in the course of loading goods onboard ships for export, including but not limited to inland freight, warehousing charge, port dues, commissions, service charges and related costs in the course of loading goods onboard ships for export;

- "Ex-workshop price" = Production cost + profit;

- "Production cost" = Raw material and material cost + labor cost + distributed cost;

- "Raw material and material cost" covers expenses for purchase of raw materials and materials, their freight and insurance;

- "Labor cost" covers wages, bonuses and other welfare amounts related to the production process;

- "Distributed cost" covers:

+ Expenses for workshops related to the production process (insurance for workshops, expenses for rent and hire-purchase of factory, depreciation of workshops, repair, maintenance, taxes and collateral interest);

+ Hire-purchase amounts and interests thereon for the factory and equipment;

+ Factory security charge;

+ Insurance (factory, equipment and supplies used in the production of goods);

+ Expenses for essentials for the production process (energy, electricity and other essentials directly used in the production process);

+ Expenses for research, development, designing and manufacture;

+ Expenses for pressing molds, casting molds, equipping of tools and depreciation, maintenance and repair of the factory and equipment;

+ Patent royalties (in relation to patented machines or patented inventions used in the production of goods or goods production licenses);

+ Expenses for testing and experimental use of raw materials, materials and products;

+ Charge for storage in the factory;

+ Expenses for waste treatment;

+ Expenditure factors in the calculation of value of raw materials and materials, such as port dues, cargo clearance fee and import tax on taxable components.

3. "Manufacturing or processing operation" criterion means a main production process in which basic characteristics of a goods are created.

4. Rules for identifying origin of goods

a/ Where produced goods are on the list of goods specified in the Appendix to this Circular, their origin shall be identified on the basis of the criteria mentioned in such Appendix.

b/ Where produced goods are not on the list of goods specified in the Appendix to this Circular, their origin shall be identified solely on the basis of "change in tariff classification of goods" criterion.

III. IMPLEMENTATION PROVISIONS

1. Implementation provisions

This Circular takes effect 15 days after its publication in "CONG BAO." Any problems arising in the course of implementation should be promptly reported by concerned organizations or individuals to the Trade Ministry for solution at the following address:

The Import and Export Department ' the Trade Ministry

21 Ngo Quyen Street, Hanoi

Telephone: 04-8262538

Facsimile: 04-8264696

E-mail: co@mot.gov.vn